Why It’s Essential To Get A Certificate Of Insurance From Subcontractors
by AJ Simcox
For businesses that rely on subcontractors, having a Certificate of Insurance (COI) from each one is a critical step that should never be overlooked. A COI is a formal document provided by an insurance agency that verifies the insurance coverage of a policyholder—in this case, your subcontractor. Without a COI on file, businesses may face increased risks, liability, and even potential financial losses if issues arise on a project. Here’s why obtaining a COI from all subcontractors is essential for protecting your business.
- Verifies Insurance Coverage – A COI confirms that your subcontractor carries active insurance coverage. This coverage should ideally include general liability, workers’ compensation, and any other policies relevant to the work they’re doing. By checking this document, you can ensure they meet your company’s insurance standards and that your subcontractor has adequate coverage for any accidents or damages that may occur.
- Reduces Your Liability Exposure – When a subcontractor performs work on your behalf, any accidents, damages, or claims they generate could potentially affect your business if they are uninsured or underinsured. For example, if a subcontractor’s employee is injured on the job and they lack adequate workers’ compensation coverage, you could be held responsible for the medical bills. Having a COI on file protects you from these risks by verifying that the subcontractor has adequate insurance to cover such incidents.
- Ensures Compliance With Contracts And Regulations – Many industries and clients require businesses to verify insurance coverage from subcontractors. Without a COI, you could be in breach of contract or fail to meet regulatory requirements, which could result in fines, penalties, or lost business opportunities. By requiring COIs, you demonstrate compliance with industry standards, protecting your business from legal repercussions and safeguarding your reputation.
- Offers Peace Of Mind – When you know your subcontractors are insured, you can have greater peace of mind regarding the work they perform. An active COI assures you that the subcontractor has financial protection in place, meaning any issues that arise can be managed without disrupting your business or negatively affecting your bottom line.
- Demonstrates Due Diligence – Clients and partners will appreciate that you’re diligent in managing risks. Requiring COIs from all subcontractors signals professionalism and a commitment to quality and safety. It shows that you’re proactive about risk management, and this diligence can enhance your credibility and attract new business opportunities.
What To Look For In A Certificate Of Insurance
When reviewing a COI, check for the following:
- Policy Effective Dates: Ensure coverage will be active throughout the duration of the project.
- Coverage Types And Limits: Confirm that the policies cover general liability, workers’ compensation, and any additional types of insurance relevant to the work.
- Additional Insured Clause: In some cases, you may want to be named as an “additional insured” on the subcontractor’s policy to extend protection to your business.
Obtaining a COI from your subcontractors isn’t just about managing risk; it’s about protecting your business and fostering trust with your clients. Make sure to have a clear process for collecting and verifying COIs from all subcontractors before they begin work on your project. By doing so, you’ll ensure smoother operations, reduce potential liabilities, and reinforce your business’s reputation for professionalism and reliability.
If you need more guidance on COI requirements or have questions about verifying subcontractors’ insurance coverage, contact us at Shafer Insurance Agency. We’re here to help you navigate the complexities of risk management and keep your business protected.